Singapore May Cut Lee’s Pay to $1.7 Million as Minister Salaries Reduced

By Shamim Adam -
Jan 4, 2012

Singapore will cut salaries for its
prime minister and top office holders after voter unhappiness
over a widening income gap weakened support for the ruling party
in last year’s elections.

Prime Minister Lee Hsien Loong’s annual income will fall 36
percent to S$2.2 million ($1.7 million) while the president’s
compensation would be reduced 51 percent to S$1.54 million,
based on the government-appointed Committee to Review
Ministerial Salaries’ recommendations released today. New
ministers will make about S$1.1 million, down from S$1.58
million, according to a statement on the committee’s website.

Lee, 59, who said today he would accept the proposed cuts,
created the panel in May after his ruling People’s Action Party
won that month’s general election with the smallest margin of
popular votes since the island’s independence in 1965.
Singapore’s ministers are among the world’s highest paid as the
government previously benchmarked their wages against salaries
of chief executive officers and other top earners in the country.

“An entry-level minister will still make more than
President Obama but you can’t please everyone,” said Eugene Tan,
a political commentator and assistant professor of law at the
Singapore Management University. “Income inequalities are
inevitable but the government is now increasingly moving towards
how they measure quality of life and development, rather than
just GDP growth.”

Record Growth

The city state’s gross domestic product increased 41-fold
from 1960 to S$285 billion in 2010, based on 2005 market prices,
and the economy (SGDYTY) grew 4.8 percent last year after expanding a
record 14.5 percent in 2010.

While investor- and immigration-friendly policies have
helped drive Singapore’s economic success, making the country
the easiest place to do business according to the World Bank,
its growth has come with a widening income gap. The island’s
Gini coefficient, an income inequality measure, rose to 0.48 in
2010 from 0.444 in 2000, according to the statistics department.
A reading of zero means income equality, while a reading of one
means complete inequality.

The island has the highest proportion of millionaire
households globally, according to the Boston Consulting Group,
contributing to higher property and consumer prices that have
pushed up living costs for its poorer citizens. Inflation (SICPIYOY) was
5.7 percent in November, matching the fastest pace since 2008.

Preventing Corruption

The government had previously said the million-dollar
ministerial earnings prevented corruption and helped attract and
retain talent. The salary of a new minister will now be
benchmarked to the median income of the top 1,000 earners who
are Singapore citizens and with a 40 percent discount “to
signify the ethos and sacrifice that comes with political
service,” the pay review committee said today.

A pension plan for ministers will be scrapped, reducing
their annual compensation, the panel proposed. Prime Minister
Lee’s salary was S$3.07 million in 2010, excluding imputed
pensions, the statement showed. The 36 percent decline in his
annual income projected by the committee includes imputed
pensions for the 2010 pay. His annual salary excluding pensions
will decline 28 percent under the revision.

U.S. President Barack Obama is paid about $400,000 annually.
Japanese Prime Minister Yoshihiko Noda’s pay was cut 30 percent
in November to 27.51 million yen ($359,000) a year from 39.29
million yen, the government said in October, in advance of
legislation that would reduce public servants’ pay to help fund
efforts to rebuild from the March 11 earthquake and tsunami.

Opposition Issue

“The government intends to accept your committee’s
recommendations,” Lee said in a Jan. 2 letter to Gerard Ee, who
chaired the Singapore panel. Singapore will move a motion in
parliament on Jan. 16 to adopt the proposed changes “as the
basis for setting political salaries,” he said in the letter,
which was posted on the committee’s website.

The new salaries will be backdated to when the current
cabinet was sworn in, the government has said.

Opposition parties in last year’s elections decried
ministerial compensation, comparing their pay to those of
ordinary Singaporeans facing rising living costs (SICPIYOY) and pressure on
wages from an influx of foreign workers. After the vote, Lee
pledged his party will change the way it rules.

Since the elections, the government has tightened rules on
foreign workers and made it more expensive for non-Singaporeans
to buy property in the city of 5.2 million people.

Singaporeans’ Concerns

Lee announced the setting-up of the salary review panel on
May 21 at the swearing-in ceremony of his cabinet, saying
Singaporeans have “genuine concerns” over the salaries of its
politicians.

“Politics is not a job or a career promotion,” he said
then. “It is a calling to serve the larger good of Singapore.
But ministers should also be paid properly in order that
Singapore can have honest, competent leadership over the long
term.”

Singapore’s policy of paying its top officials millions of
dollars won the support of Rupert Murdoch, chairman and chief
executive officer of News Corp., who highlighted the benefits of
such wages last year.

“We ought to look at the most open and clear society in
the world, which is Singapore, where every minister gets at
least a million dollars a year, and the prime minister a lot
more, and there is no temptation,” Murdoch told a British
parliamentary committee after a hacking scandal. “It is the
cleanest society you’d find anywhere.”